Ford stock falls after analysts downgrade the automaker’s shares

Yahoo Finance Live’s Brian Sozzi discusses the top concerns and challenges for American automaker Ford moving forward.

Video transcript

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JULIE HYMAN: Well, stodgy old Ford has been on quite a run thus far in 2022. It pushed its valuation above $100 billion, but that didn't last long. Brian Sozzi, there's one prominent auto analyst who's taken aim at the company.

BRIAN SOZZI: Yeah, the bears are starting to swirl, Julie. My day started off with reading a very lengthy note out of the always market-moving Adam Jonas over at Morgan Stanley, coming out, reiterating an underweight rating on Ford, which is essentially the equivalent of sell, with a $12 price target. I actually clicked out of the document and opened it again to make sure I wasn't seeing things. $12 a share is basically predicting that Ford's stock could fall 52%.

Now, Jonas outlining a couple of concerns here, which are totally understandable, but, you know, the stock is not really moving here on this. And then also, another downgrade out of RBC auto analyst Joseph Spak today, so we're seeing dueling bear notes here, which I think underscores the enthusiasm in Ford-- in Ford's outlook this year that the stock's only moving when two prominent analysts come out here negative.

But nonetheless, Jonas noting that, as auto production picks back up, you could start to see some price declines on automobiles. Now, keep in mind, auto-- auto sales have been very strong, in large part because automakers have been able to push through price increases during the pandemic. Jonas argues, that will start to shift as more cars come into the market, as those chip supply shortages start to abate. Next up, you know, at $25 a share or so, Jonas argues that it's going to be difficult for Ford to beat analyst estimates now on how many electric vehicles it sells-- point well taken.

And then Jonas also notes that there's more competition coming in this space, and he's right to highlight that, just off Tesla out there in a leadership position in EVs. You have Rivian. Maybe they'll be able to make more than a hundred trucks this year. We'll wait and see on that. But again, a very bearish take by Jonas over at Morgan Stanley and another bearish valuation concern downgrade by Joseph Spak over at RBC.

JULIE HYMAN: You know, I find the argument that the prices on cars are going to come down interesting because, to your point, one would think they're going to make up for it with volume, right? People-- people aren't buying cars right now because they can't get them. Or if they can get them, they're finding them too expensive. So if prices come down and there are more cars in the lot, you would think that that would be positive overall.

BRIAN SOZZI: I would-- right. I would push back a little bit on what Jonas mentions on the price declines in autos. You know, under new Ford-- under Ford's new CEO, Jim Farley, they have employed a strategy of putting fewer cars on dealer lots. So his-- his take really has been over the past year and a half that historically, Ford's just put too many cars on dealer lots. That has forced them to offer more incentives. The prices decline, and that ultimately hits Ford's profits. You know, I think what Jonas may be just discounting here is the fact that, you know, Ford under Farley is just operating a lot differently. They're going to put less cars on lots. It's going to try to keep prices high, and we'll see what happens.